IIFL Finance Secured NCD – Standout features of the Tranche II issue

The issue will open on 27th September 2021 and close for subscription on 18th October 2021, (with an option of early closure)

Sep 27, 2021 08:09 IST India Infoline News Service

IIFL Finance, the fund-based business unit of the IIFL group, proposes to raise Rs100cr via the issue of NCDs under the NCD-Tranche 2 with a green-shoe option to retain another Rs900cr in the event of oversubscription. That takes the total issue size to Rs1,000cr in a best case scenario.

A quick brief on IIFL Finance

IIFL Finance Ltd is a systemically important non-deposit accepting NBFC registered with and regulated by the RBI. It basically caters to the credit needs of customers. Its product portfolio encompasses home loans, gold loans, business loans, LAP, MSME finance, real estate finance and capital market finance. The company operates through a network of 2,582 branches across India and employs over 22,600 people.

IIFL Finance has a loan book of Rs. 43,160 crore as of June 30, 2021 and gross NPAs of just 2.2% and net NPAs of 1.0%, despite the pressures of COVID-19 and COVID 2.0. The IIFL group is into asset financing, retail stock broking, institutional broking, distribution & financial advisory, wealth management, asset management and investment banking.

Key terms of the Secured Redeemable NCD Tranche-2 issue
  1. The issue will open on 27th September 2021 and close for subscription on 18th October 2021, (with an option of early closure).
  2. The base size of the NCD issue will be Rs100cr with a Greenshoe option to retain up to Rs900 crore in the event of oversubscription, taking total issue size to Rs1,000cr.
  3. The NCDs will have a face value of Rs.1,000 and investors can apply for a minimum of 10 NCDs with a minimum investment of Rs.10,000 and in multiples of 1 NCD thereafter.
  4. The NCDs will come in 3 tenure options of 24-months, 36 months and 60 months. Each tenure will have annual coupon option and also cumulative option. The monthly coupon option is only available for the 60-month option.
  5. The NCDs are rated “CRISIL AA/Stable" by CRISIL and "BWR AA+/Negative" by Brickwork. This can be summarized as high safety for repayment of interest and principal.
  6. The bonds will be issued in compulsory demat form only with connectivity to CDSL and NSDL. The bonds will have secondary market listing on BSE and NSE.
  7. While Link Intime India Pvt Ltd will be the registrars to the NCD issue, Catalyst Trusteeship Ltd will be the debenture trustee. The issue will be managed by Edelweiss Financial, IIFL Securities and Equirus Capital.
  8. There will be no reservation in the NCD issue and the issue for each category of investors will be on a first come-first serve basis.
  9. The maximum yield to maturity on the bonds, across categories will be 8.75% p.a., which is significantly higher than what investors can earn in similar debt products
  10. The investors can indicate their specific choice of series based on tenure and coupon payments. In case, no choice is indicated, the default option will be Series-III, which is a 36-month NCD with coupon of 8.50% p.a.
  11. There is a special incentive scheme for existing shareholders of IIFL Finance equity or/and in the previous issue of IIFL bonds/NCD. They will earn additional incentive of 0.25%. p.a.
Coupon Rates payable for various tenures of NCDs

Such complex matrices are best understood with the help of a tabular analysis. Here is a quick analysis of the various investment options available to you. All the NCDs will issued at the face value of Rs1,000.
Tenure of Bond Series Name Interest Paid Coupon Rate
(% p.a.)
Redeemed at Effective Yield (per annum)
24-Months Series I Annual 8.25% Rs.1,000.00 8.25%
24-Months Series II Cumulative N.A. Rs.1,171.80 8.25%
36-Months Series III Annual 8.50% Rs.1,000.00 8.49%
36-Months Series IV Cumulative N.A. Rs.1,277.60 8.50%
60-Months Series V Monthly 8.42% Rs.1,000.00 8.75%
60-Months Series VI Annual 8.75% Rs.1,000,00 8.75%
60-Months Series VII Cumulative N.A. Rs.1,521.41 8.75%
Data Source: IIFL Finance Tranch II prospectus

While the table is self-explicit, here is a gist of the various options of interest payment and tenure available to you.
  • You can opt for 24-month, 36-month or 60-month tenures. Longer the tenure, the coupon and the yield to maturity (YTM) will also be higher in a progressive manner.
  • Once you select the tenure, you can opt for annual coupons or cumulative option. Cumulative option does not pay periodic interest but it is cumulated, reinvested and paid on redemption. Cumulative bonds will be issued at par and redeemed at premium.
  • The monthly option is only available on the 60-month tenure.
  • You can select the appropriate Series (I to VII) based on the preferred combination of tenure, coupon rate and pay-out. Series-III, that is annual coupon payments for 36-months tenure is the default option.
Who can invest in the IIFL Secured NCDs?

Applicants shall apply in this Issue in dematerialized form only, through valid Application Form filled in by the Applicant along with attachment, as applicable. Further, applications shall be made through UPI (for applications upto Rs. 2 lakhs) and ASBA facility only.

Indian investors have been classified under four categories. The table below captures details of each category, the allocation and the examples of each category of investors.
Category Investor Type Allocation Examples
Category I Institutional Portion 10% Commercial banks, DFIs, PFs, gratuity funds, AIFs, Venture Funds, Insurers, Mutual Funds, systemically important NBFCs, National Investment Fund etc
Category II Non-Institutional Portion 10% Companies, co-op banks, RRBs, trusts, partnership firms, LLPs, Scientific Research organizations, statutory bodies, AOPs etc.
Category III High Net Worth Investors 40% Resident Indians or HUFs applying above the threshold of Rs10,00,000 across the various Series of the NCD Tranche 2 in aggregate
Category IV Retail Investors 40% Resident Indians or HUFs applying under Rs10,00,000 across the various Series of the NCD Tranche 2 in aggregate and up to Rs2,00,000 in each series

All allotments to the various categories will be on a first-come first-serve basis only.

Taxation of interest earned on NCDs by individual investors?

The coupon interest earned on the NCDs will be taxed at the peak incremental rate of tax applicable depending on the bracket the investor falls under. The interest is taxable but there will be no TDS deducted by IIFL Finance since that is not required if NCDs are issued in demat mode and listed in the stock exchanges.

In the case of deep discount bonds, accrued interest has to be shown as taxable income each year, even though it will only be received on maturity.

To know more, visit iifl.com/bonds

For further details, refer Shelf Prospectus dated February 24, 2021 and Tranche II Prospectus dated September 22, 2021 available on Company, Lead Managers and Stock Exchanges website.

IIFL Secured NCD Tranche-II got closed on 8th October, 2021.

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